Canadian Utilities (TSX:CU) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Canadian Utilities Limited reported an 8% year-over-year increase in adjusted earnings for Q3 2026, reaching $117 million, driven by growth in rate base and inflation indexing impacts.
The company announced a merger with Emera, expected to create a top-20 North American utility with enhanced scale and access to capital, promising a 20% dividend increase for Canadian Utilities’ shareholders.
Key growth opportunities highlighted include significant infrastructure investments in Alberta, driven by high electricity demand and population growth, and potential projects like the Yellowhead Pipeline and transmission infrastructure expansion.
Operational excellence continues to be a focus, with Canadian Utilities maintaining high returns on equity and achieving cost efficiencies, reflected in their superior performance relative to peers.
The merger is anticipated to strengthen capabilities in large gas-fired generation and electric transmission, leveraging Emera’s expertise and capital access.
Management expressed confidence in a smooth regulatory approval process for the merger, with no major red flags anticipated.
The company is committed to balancing infrastructure investment with affordability and exploring growth in unregulated segments like natural gas storage, supported by disciplined capital allocation.
Full Transcript
OPERATOR (Conference Operator)
Thank you for standing by. This is the conference operator. Welcome to the third quarter 2026 results conference call and webcast for Canadian Utilities Limited. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero.
I would now like to turn the conference over to Mr. Colin Jackson, Senior Vice President, Financial Operations. Please go ahead, Mr. Jackson.
Colin Jackson (Senior Vice President, Financial Operations)
Thank you and good morning, everyone. We are pleased you could join us for Canadian Utilities’ third quarter 2026 conference call. On the line today we have Bob Miles, Chief Executive Officer, and Katie Patrick, Chief Financial and Investment Officer. Before we move into today’s remarks, I would like to take a moment to acknowledge the numerous traditional territories and homelands on which our global facilities are located. Today I am speaking to you from our ATCO Park head office in Calgary, which is located in the Treaty 7 region. This is the ancestral territory of the Blackfoot Confederacy, comprised of the Siksika, the Kainai and the Piikani Nations, the Tsuut’ina Nation, and the Stoney Nakoda Nations, which include the Chiniki, Bearspaw, and Goodstoney First Nations.
I also want to recognize that the City of Calgary is home to the Métis Nation of Alberta, Districts 5 and 6. During the quarter, employees across Canada recognized the National Day for Truth and Reconciliation by walking together to honor Indigenous communities and their experiences. May we continue to reflect, learn, and respect the diverse history of languages, ceremonies, and cultures of Indigenous peoples as we move forward towards understanding, healing, and reconciliation.
Today’s remarks will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please refer to our filings with the Canadian securities regulators. During today’s presentation, we may refer to certain non-GAAP and other financial measures including adjusted earnings, adjusted earnings per share, and capital investment. These measures do not have any standardized meaning under IFRS and, as a result, they may not be comparable to similar measures presented by other entities.
Please refer to our filings with the Canadian securities regulators for further information. I’d also like to highlight, as part of the merger announcement, we have launched a joint website with Amira where investors can access transaction-related information, key documents, and ongoing updates. And now I’ll turn the call over to Bob for his opening remarks.
Bob Miles (Chief Executive Officer)
Thanks, Colin, and good morning, everyone. I’d like to begin my remarks today by speaking to our recently announced merger with Emera. This merger into a utility champion marks a defining moment that I believe will benefit all shareowners. Not only does this transaction position the business to respond to increasing investment requirements, but as part of Emera, shareowners can expect to benefit from greater scale, broader capabilities, geographic diversification, and enhanced access to capital, which strengthens our ability to invest in the future while maintaining the disciplined approach that has defined Canadian Utilities for decades.
Together, the merged company will create a top-20 North American utility, an energy infrastructure company with a rate base of $45 billion, 6 million customers across 12 regulated utilities, and approximately 95% of earnings coming from regulated operations. Upon close, Canadian Utilities shareowners will receive an approximate 20% increase in dividend, while shareowners of the combined company will benefit from meaningful exposure in key markets including Australia, along with two of North America’s most attractive growth markets, Alberta and Florida.
With Alberta being our largest rate base region within Canadian Utilities, I’ll expand on the opportunities in this high-growth market shortly. Put simply, this merger brings together two organizations that share similar values, a long-term perspective, and a deep understanding of the responsibility that comes with operating essential infrastructure. Moving forward, the combined company will be able to grow, compete, and operate more effectively.
Within that context, the combined company is expected to deliver more capital, capacity to fund future growth, added scale to compete for major projects, and a continued commitment to annual dividend growth and improvement in the dividend payout ratio. We believe this transaction creates compelling value for shareowners, meaningful opportunities for employees, and a stronger foundation for continued investment in the communities we serve. As we progress through 2026, our efforts continue to remain centered on three strategic priorities: growth and prosperity, operational excellence, and financial leadership, which Katie will address in more detail shortly. By continuing to execute consistently across these areas, we are well positioned to advance our growth strategy and deliver on our objectives.
Starting with Growth and Prosperity, Canadian Utilities is positioned at the center of one of North America’s most attractive infrastructure growth geographies in Alberta. Alberta’s markets are supported by multiple long-term demand drivers that are accelerating capital requirements across energy, power, and industrial infrastructure. Moreover, Alberta has experienced the highest population growth over the last five years and has significantly higher forecasted GDP growth when compared to the Canadian average.
These growth drivers, in addition to our resource advantage, create a direct line of sight to the need for utility investment. The most immediate catalyst is unprecedented growth in electricity demand, with 2.3% per year growth through the next decade. The province is undergoing a step change in load growth, driving the need for investment in both generation and transmission grid infrastructure. Load growth is expected to come from a diverse set of sources including data centers, expanded market access projects, industrial growth, and decarbonization investments.
Collectively, these trends in Alberta underpin a multi-decade opportunity set for infrastructure investment supported by durable demand fundamentals and a growing need for essential energy and utility assets. On our current project front, the Yellowhead Pipeline exemplifies the role Canadian Utilities plays in delivering essential infrastructure for Alberta’s growing economy. I am pleased to share that construction commenced in August and we remain on track for an in-service date in the fourth quarter of 2027. Once in service, this $2.9 billion project will add more than 1 billion cubic feet per day of natural gas transportation capacity, helping ensure Alberta’s Industrial Heartland has access to the reliable energy required to support industrial development and future growth.
The Yellowhead Pipeline project is a major contributor to growth in our five-year plan and remains an essential infrastructure investment that will support the province’s continued development and energy reliability. Our teams remain focused on executing our five-year capital plan that we disclosed earlier this year. While the Yellowhead Project is an important initiative, we see considerable growth across our regulated utilities in Alberta. We are supporting this growth through our $12 billion capital program over the next five years. Importantly, our capital program is built on projects with a high degree of certainty, providing strong visibility into future growth.
However, we see additional upside beyond the current plan, especially in Alberta. As I have said on previous calls, the latter years of our five-year outlook do not include several major infrastructure opportunities which we expect to emerge, supported by demand drivers in Alberta that I discussed earlier. For example, recent pipeline project announcements build confidence in resource and energy infrastructure investments. We view this as a meaningful opportunity for our growth potential as it creates further demand for interconnected transmission infrastructure in Alberta.
Continued expansion of the NGTL system supports growth in Western Canadian natural gas production, LNG exports, industrial development, and population growth, all of which can contribute to higher energy demand and future rate base investment opportunities across Canadian Utilities’ regulated gas and electric infrastructure businesses. In addition, a stronger outlook improves the rationale for expansion projects such as Yellowhead. At the same time, we see attractive transmission opportunities, including the McNeill Alberta–Saskatchewan Intertie, which has been designated as one of five high-priority interprovincial power line projects.
As these opportunities are advanced and secured, they have the potential to provide incremental growth beyond what is reflected today across our regulated utilities. We are focused on balancing infrastructure investment with affordability. Our goal is to deliver a safe, reliable, and resilient energy system that serves the needs of customers and communities both today and in the future. It’s also worth noting that our outlook does not incorporate potential contributions from our non-regulated businesses, including opportunities such as natural gas storage and generation expansion. As these opportunities advance, they have the potential to provide additional growth beyond the outlook we have disclosed.
To align with our previous disclosure cadence, we will roll forward our capital plan forecast when we release our fourth quarter results. Now moving to operational excellence, as you can see on the top half of the slide, both ATCO Gas and ATCO Electric Distribution consistently delivered annual ROEs above peer averages and approved levels, exceeding them by approximately 200 basis points and 300 basis points, respectively, from 2013 to 2025. This consistent outperformance reflects our disciplined approach to managing cost, improving productivity, and operating our businesses efficiently.
The graphs on the bottom half of the slide highlight the benefits of those efforts. Across successive PBR cycles, our teams have generated meaningful efficiencies that have helped to limit distribution charge increases, creating tangible savings for our customers while maintaining safe and reliable service. This track record has positioned us among the most efficient utilities in Canada, and we remain focused on delivering further efficiencies to drive continued outperformance alongside customer affordability.
Safety, reliability, and resilience are foundational to everything we do. They guide not only our day-to-day operations but also how we invest and grow our business. Our focus is on ensuring that our infrastructure can safely and reliably deliver energy even as operating conditions become more challenging and customer expectations continue to evolve. This focus is shown in our safety record and reliability performance. As you can see on this slide, we saw significant year-over-year performance improvement in the overall reliability of our Alberta distribution utilities.
As extreme weather events become more frequent, we are broadening our approach to balance operational readiness with long-term system resilience, which includes investing in the hardening of our assets, and that is why five of our $12 billion five-year capital plan is directed to improving safety, resilience, and adaptation. Within our Canadian non-regulated portfolio, our natural gas storage business continues to generate stable earnings and cash flow, reinforcing its value to the broader business. This year we’ve continued executing our strategy to grow and enhance our storage platform through a series of low-cost organic expansions. During the quarter we completed the Carbon storage expansion and we’re on track for the Alberta Hub expansion to enter commercial service in the fourth quarter.
Together these projects will increase our total storage capacity by 10% to approximately 130 petajoules, while also enhancing the earnings and cash flow potential of the business. More broadly, they demonstrate our ability to generate attractive returns through disciplined, efficient investments. Looking ahead, we see additional opportunities to expand our storage platform and we believe we are well positioned to capture that growth over the coming years.
Our third pillar is financial leadership, and with that I’ll pass the call to Katie to discuss this in further detail.
Katie Patrick (Chief Financial and Investment Officer)
Thanks, Bob. Moving into the third quarter performance for Canadian Utilities, I’m pleased to share that we delivered another quarter of strong year-over-year earnings growth. Canadian Utilities achieved adjusted earnings of $117 million, up from $108 million in Q3 2025. This 8% growth was primarily driven by growth in rate base in ATCO Energy Systems and the impact of inflation indexing on rate base and increased rates in ATCO Gas Australia. Looking at the specific business units, what is apparent is the consistent growth we delivered at our two largest segments. ATCO Energy Systems achieved adjusted earnings of $103 million in the third quarter, $5 million higher year over year. This was primarily driven by strong rate base growth across our utilities. ATCO EnPower delivered slightly lower results year over year. Adjusted earnings were $15 million for the quarter, mainly due to lower realized carbon pricing and lower compensation related to turbine availability guarantees at the Forty Mile Wind facility, partially offset by stronger seasonal spreads in natural gas storage services.
ATCO Australia had another strong quarter, delivering adjusted earnings of $29 million, up $2 million year over year. The increase was primarily driven by the impact of inflation indexing on rate base, higher foreign exchange rates, and higher customer rates. In ATCO Gas Australia, our cash flow from operating activities increased by $58 million year over year, largely driven by higher cash earnings within most business units and higher customer contributions in natural gas transmission, partially offset by the timing of working capital entering the last quarter of the year.
We intend to build on the momentum from the first three quarters, continuing to execute on our capital plan. I will now turn the call back to Bob for closing remarks.
Bob Miles (Chief Executive Officer)
Thanks, Katie. Following our strong execution year to date, we continue to focus on delivering our strategic objectives and capturing growth opportunities through the balance of 2026. We remain confident in our outlook for the remainder of the year and the long-term opportunities ahead, especially those within our primary jurisdiction of Alberta. We’re excited to play a leading role in Alberta’s continued growth, where strong population trends, economic development, and industrial investment are driving increased demand for electricity and natural gas infrastructure and supporting meaningful long-term growth opportunities. Merging with Emera creates value for all shareowners, and together we play a leading role in the continued energy infrastructure buildout across all of our jurisdictions where we operate.
This concludes our prepared remarks. I’ll now turn the call back to Colin for questions from the investment community.
Colin Jackson (Senior Vice President, Financial Operations)
Thank you, Bob and Katie. In the interest of time, we ask you to limit yourself to two questions. However, if you have additional questions, you’re welcome to rejoin the queue. I’ll now turn it over to Gaylene, our conference coordinator, for questions.
OPERATOR (Conference Operator)
Thank you. To join the question queue, you may press star then 1 on your telephone keypad. You’ll hear a tone acknowledging your request. If you’re using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. Once again, anyone on the conference call who wishes to ask a question may press star then 1. At this time, the first question is from Maurice Choi with RBC. Please go ahead.
Maurice Choi (Analyst)
Thank you and good morning everyone. Just wanted to start with the pending merger. Can you speak to the types of growth opportunities that you believe shareholders should expect following the merger? And specifically, what opportunities do you see Canadian Utilities being able to more forcefully go after in partnership with Emera that it couldn’t in the past? And if you could detail some of this between regulated and the unregulated segments are appreciated.
Bob Miles (Chief Executive Officer)
Maurice, thanks for that. And I mean, I know we’ve chatted about this in the past. What I really see the benefits with Emera are probably the big thing is additional access to capital and the benefits of additional expertise. And one area where I can tell you definitely see some benefits and opportunities are in large interties, and we’ve done a lot of that in Canadian Utilities over the years — built large electric transmission. I think Emera brings a lot of skill sets in that, but definitely access to capital.
I’ve spent a fair bit of time working with Emera over the last number of months, as you can imagine. And they also bring a lot of experience in large gas-fired generation, which is an area of focus as we discussed previously. So I’d say those two areas are areas that I see a benefit in the merger: large electric transmission and, I would say, large gas-fired generation.
Maurice Choi (Analyst)
Maybe as a quick follow-up to that. I recall about a year ago when data centers was obviously a big theme in the province, and even bigger today, Canadian Utilities effectively resurrected the ambition to rebuild its thermal power generation in Alberta. Is this the direction of travel that you’re referring to in terms of Emera bringing with it expertise in gas generation?
Bob Miles (Chief Executive Officer)
Yeah, Maurice, they do have a lot of gas-fired generation in their Florida operations. They’re in the process of building, you know, more gas-fired generation there as we speak. So they definitely bring that. You know, we still believe in, you know, that gas-fired generation in this province of Alberta is definitely an opportunity in the future. We just want to make sure that we have contracts to support it, and that’s consistent with our approach in the past.
Maurice Choi (Analyst)
Are you anticipating that the contracts underpinning these gas-fired generation will be similar to the type of risk and return profiles as your regulated business, or at least close to it?
Bob Miles (Chief Executive Officer)
Yes, yes, Maurice.
Maurice Choi (Analyst)
That’s great. And if I could finish off with a question on the approval process. Obviously the regulatory one in Alberta is one of the many to watch. Can you speak to the application that was filed together with Emera, the areas you think will receive the initial focus, and how do you plan to address some of those?
Katie Patrick (Chief Financial and Investment Officer)
Sure. Maurice, it’s Katie. I’m happy to take that one. Yeah, as is known, we filed the application with the AUC and we certainly have positive indications related to the timing of that. We’ve asked for the process to be expedient and I think they have indicated that they’ll endeavor to do that. So we view that certainly as a positive for the path to close. I would say that there’s nothing that we potentially see at this point as a big red flag issue from that approval process. As you know, it is a no-harm test for customers, so the standard is one of the better standards in terms of the North American jurisdiction. So we’re pretty positive and hopeful that that will be a smooth process.
Maurice Choi (Analyst)
Thank you very much for that.
OPERATOR (Conference Operator)
Once again, if you have a question, please press star then 1. The next question is from John Mold with TD Cowen. Please go ahead.
John Mold (Analyst)
Hi, morning everybody. Thanks for taking my questions. Maybe just going back to the large interties comment. I guess I’m just wondering, you know, there’s a lot of things that have to come together for such a project to proceed. I guess I’m wondering, as you see the environment right now, do you see that the stars aligning to, you know, to create the conditions where we could see, you know, one or more meaningful intertie projects, let’s say, nudge forward?
And, you know, if not, what else needs to change? Whether it’s on the approval side, whether it’s, you know, frankly, creating a commercial construct where the incentives are there for interties to proceed? I guess I’m framing that question and I absolutely take your point that the scale and expertise of the two companies coming together can enable your competitive position. I guess I’m asking about the broader landscape and whether you see it providing that opportunity set as the environment exists right now.
Bob Miles (Chief Executive Officer)
Yeah, John, I agree with your comment there about we see the benefits of a larger company to be able to pursue those opportunities. What I would say is encouraging is the federal government’s approach. They’ve come out publicly stating they want to build the east-west electric transmission grid, so those are very positive signals. We’ve done a lot of work recently with the Major Projects Office. They’ve taken a lot of interest in this. The challenge I would say that still needs to be addressed is the impacts on affordability. And, you know, I could tell you we don’t want to be doing things that are going to significantly negatively impact affordability for, you know, the people of this province or for the people of the rest of Canada. So that’s the work that is underway right now — how we manage that with support from both the provincials and the federal government. And, you know, again, it’s a process that we have to go through.
But we believe there’s been more progress probably made on that in the last year than probably in many years prior to that.
John Mold (Analyst)
Okay, thanks for that color. And then maybe coming back to the unregulated side of the investment opportunity set. I’m not asking you to update your capital plan for us on the call here right now, just to be clear, but just philosophically, when you think about the investment opportunity set, especially when you add in the scale and capabilities that you talked about on the gas-fired side with the combined company, how do you think about the split between unregulated but contracted generation, the gas storage side, and then potentially maybe other midstream investment opportunities as well?
We talked about you looking at midstream opportunities on the previous quarterly call. Obviously that was before the merger announcement came in October, but I think that’s an area that you look at more broadly. So I would appreciate some color on how you think about those buckets of opportunity in terms of capital allocation between those unregulated businesses.
Bob Miles (Chief Executive Officer)
John. You know, I think, you know, I’m a believer in those non-regulated opportunities. I think they give us good diversity, and we had kind of just set some targets internally of where we’d be willing to go on the split between reg and non-reg in Canadian Utilities. And the conversations we’ve had with Emera on that is they’re also very supportive of that. So the initiatives that we’ve been pursuing in that space, being midstream and, you know, the gas-fired generation space, we are continuing to pursue those opportunities.
And, you know, but we’re not going to pursue an opportunity that does not make good financial sense. And so that will remain. You know, we just need to get through the merger process before we can do anything, you know, in the shorter term.
John Mold (Analyst)
Okay. Fair enough. Thank you for that color. I’ll get back in the queue.
OPERATOR (Conference Operator)
Once again, if you have a question, please press star then 1. There appear to be no further questions, so this concludes the question and answer session. I’d like to turn the conference back over to Mr. Colin Jackson for any closing remarks.
Colin Jackson (Senior Vice President, Financial Operations)
Thank you, Gaylene. And thank you all for your participation today. We appreciate your interest in Canadian Utilities. We encourage you to visit the transaction website and look at the transaction presentation, and we look forward to speaking with you again soon.
OPERATOR (Conference Operator)
This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.